Remember the Spam Text Warning? FTC Shuts Them Down.

Previously I reported on spam text that were being sent to consumers, claiming that people had one a major gift card. However the fine print showed that “winners” would have to apply for products and services including financial services and debt relief.

According to one of the FTC complaints filed today it describes how consumers would be duped into paying for services or referring people in hopes of receiving a free gift card.

After consumers complete the first offer page, the SubscriberBASE websites lead them through a series of web pages containing offers for various goods and services from third parties. A consumer must accept (and often pay for) – in the parlance of the SubscriberBASE websites, “complete” or “participate in” – a certain number of offers made by third parties to qualify for the promised free merchandise. The SubscriberBASE websites do not clearly and conspicuously disclose the costs and obligations associated with participating in the third-party promotions, such as applying and qualifying for credit cards.

The consumer usually must complete a total of thirteen (13) offers in order to qualify for the promised free merchandise. In addition to completing their own offers, consumers also must often refer three other persons to complete thirteen (13) offers each to qualify for the promised free merchandise. Clicking on each offer reveals what the consumer must do to “complete” or “participate in” the offer. In most cases, completing an offer entails paying money or incurring some other obligation, such as applying and qualifying for credit cards.

Some of the offers have free trial periods, but require consumers to participate for a minimum period of time to qualify for the promised free merchandise and to pay an initial shipping and handling charge. Moreover, many of these offers also contain negative option components in which consumers who do not cancel will be billed automatically and indefinitely.

In many instances, consumers stop trying to qualify for the promised free merchandise, whether because of the cost involved, because of the time and effort required, or because consumers thought that, by inputting their contact information and completing the landing page, registration page, or offer page, they qualified for the promised free merchandise. Consumers have expended money, provided sensitive personal information, or incurred other obligations in the pursuit of the promised free merchandise. However, because they have not completed all of the required third-party promotions, consumers do not receive the promised free merchandise.

In most if not all instances, it is impossible for a consumer to qualify for the promised free merchandise without spending money.

Example of Spam Text Message

The Federal Trade Commission is cracking down on affiliate marketers that allegedly bombarded consumers with hundreds of millions of unwanted spam text messages in an effort to steer them towards deceptive websites falsely promising “free” gift cards.

In eight different complaints filed in courts around the United States, the FTC charged 29 defendants with collectively sending more than 180 million unwanted text messages to consumers, many of whom had to pay for receiving the texts. The messages promised consumers free gifts or prizes, including gift cards worth $1,000 to major retailers such as Best Buy, Walmart and Target. Consumers who clicked on the links in the messages found themselves caught in a confusing and elaborate process that required them to provide sensitive personal information, apply for credit or pay to subscribe to services to get the supposedly “free” cards.

“Today’s announcement says ‘game over’ to the major league scam artists behind millions of spam texts,” said Charles A. Harwood, Acting Director of the FTC’s Bureau of Consumer Protection. “The FTC is committed to rooting out this deception and stopping it. For consumers who find spam texts on their phones, delete them, immediately. The offers are, in a word, garbage.”

The FTC complaints targeted defendants who sent the unwanted text messages, as well as those who operated the deceptive websites. In addition, the FTC is pursuing a contempt action against a serial text message spammer, Phil Flora, who was barred in 2011 from sending spam text messages and who is accused of being part of this spam texting scheme as well.

The Commission’s complaints seek restraining orders against the defendants preventing them from continuing their alleged deceptive and unfair practices as well as preserving and accounting for their assets.

According to the FTC complaints, the defendants sent text messages to random phone numbers, including to consumers who do not have a text message subscription plan. As many as 12 percent of mobile phone users fall into this category.

When consumers followed the links included in the unwanted messages, they were directed to sites that collected a substantial amount of personal information, including in some instances health information, before being allowed to continue toward receiving the supposed gift cards. In many cases, the information was requested under the guise of being shipping information for the supposed gift cards. The Commission alleged the information collected was then sold to third parties for marketing purposes, meaning consumers were deceived as to the real use of the information.

Once consumers entered their personal information, they were directed to another site and told they would have to participate in a number of “offers” to be eligible for their gift card. In some cases, consumers were obligated to sign up for as many as 13 of the offers. These offers frequently included recurring subscriptions for which consumers were required to provide credit card information. In other cases, they required consumers to submit applications for credit that would be reflected in their credit reports and possibly affect their credit score. If a consumer completed all of the “offers,” they were then notified that to get the promised gift card, they had to find three others who also would complete the offers.

The FTC alleged that the operators of these sites violated the FTC Act by failing to tell consumers about all the conditions attached to the “free” gift, including the possibility that consumers would actually be required to spend money to receive the gift.

According to the FTC, the defendants who sent the text messages were paid by the operators of the “free” gift websites based on how many consumers eventually entered their information. The operators of the free gift websites were in turn paid by those businesses who gained customers or subscribers through the “offer” process.

The Commission vote authorizing the staff to file the eight complaints was 4-0-1, with former Chairman Jon Leibowitz not participating.

Seven complaints were filed against the alleged senders of the unsolicited text messages containing deceptive promises of free gifts and prizes:

Superior Affiliate Management, a case against five defendants: Ecommerce Merchants, LLC (also doing business as Superior Affiliate Management); Cresta Pillsbury, Jan-Paul Diaz, Joshua Brewer and Daniel Stanitski. This case was filed in U.S. District Court for the Northern District of Illinois in Chicago.

Rentbro, Inc., a case against three defendants: Rentbro, Inc., Daniel Pessin and Jacob Engel. This case was filed in U.S. District Court for the Northern District of Illinois in Chicago.

Jason Q. Cruz, a case against one defendant, Jason Q. Cruz (also doing business as Appidemic, Inc.) This case was filed in U.S. District Court for the Northern District of Illinois in Chicago.

Rishab Verma, a case against two defendants: Verma Holdings, LLC and Rishab Verma. This case was filed in the U.S. District Court for the Southern District of Texas in Houston. AdvertMarketing, a case against three defendants: AdvertMarketing, Inc., Scott A. Dalrymple and Robert Jerrold Wence. This case was filed in the U.S. District Court for the Southern District of Texas in Houston.

Henry Kelly, a case against one defendant, Henry Nolan Kelly. This case was filed in the U.S. District Court for the Northern District of Georgia in Atlanta.

Seaside Building Marketing, a case against four defendants: Phillip Flora, Sandra Skipper, Kevin Beans and Dakota Geffre (all of whom are also doing business as Seaside Building Marketing Inc. and SB Marketing). This case was filed in the U.S. District Court for the Central District of California in Los Angeles.

One complaint was filed against the alleged operators of the deceptive websites to which consumers were directed by the spam text messages:

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